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Google hurts consumers by rigging prices

The EU has imposed a $2.7 billion fine on Google as a result of its anti-competitive behavior. A Silicon Valley antitrust lawyer Gary Reback explained how the search engine company hurts consumers.

Published: July 8, 2017, 9:40 am

    Reback explained in an opinion piece for the Washington Post, titled: You Should Be Outraged at Google’s Anti-Competitive Behavior that before 2007, products would appear in Google search results, ranked in the order of their quality to users.

    Following a seven-year long investigation by the EU of Google’s search engine practices, the European Commission has alleged Google denied “consumers a genuine choice” by unfairly promoting Google Shopping in internet searches to the detriment of its rivals. The fine is the highest ever imposed in Europe for anti-competitive behavior.

    Such “comparison shopping sites” were designed to identify the lowest prices. “The more accurate and comprehensive their results, the higher they were ranked and the more traffic they generated,” Reback noted.

    “But the more successful that comparison shopping sites became, the more they threatened Google’s business plan. Google makes money by selling ads placed next to its free search results, and merchants could not be expected to bid for ad placement if the listings in comparison shopping sites on the same search undercut their prices.”

    To address this, Google developed a devious plan, documented by the FTC, and published in the Wall Street Journal.

    “Quoting internal Google documents and emails, the report shows that the company created a list of rival comparison shopping sites that it would artificially lower in the general search results, even though tests showed that Google users ‘liked the quality of the [rival] sites’ and gave negative feedback on the proposed changes.

    “Google reworked its search algorithm at least four times, the documents show, and altered its established rating criteria before the proposed changes received ‘slightly positive’ user feedback. Internal Google documents predicted that the proposed changes would reduce rivals’ user traffic up to 20 percent and subsequently reported producing the desired results once the changes were implemented.”

    Google then bumped up results from its own comparison shopping service to the top of their search results. “After these changes, the only source of low-price information readily available on Google’s search platform came from Google’s own comparison shopping service,” Reback said.

    “Google’s conduct certainly hurt its rivals, particularly after a second round of search-listing demotions documented by the European Union. Many companies have been forced to lay off all of their employees and even shut down operations,” the lawyer concluded. Those rivals included US consumer review website Yelp, TripAdvisor, UK price comparison site Foundem, News Corp and lobbying group Fair Search.

    Google’s prices for everyday products are much higher than those on rival sites, sometimes more than 50 percent higher. A study by the Financial Times documented the higher prices, as Google eliminated services showing the lowest prices, free to merchants, and replaced them with high-priced ads.

    Other countries have also accused the Silicon Valley tech giant of abusing its market clout by imposing restrictions on Android device manufactures and mobile network operators.

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